Thorn and Granad to sue over ‘illegal’ tax

Thorn and Granad to sue over 'illegal' tax

Thorn and Granada prepare #400m case against government.

High street rental rivals Thorn and Granada are preparing to sue the government for up to #400m in insurance premium tax, claiming that the two-tier system amounts to an illegal turnover tax on retailers.

Lawyers for the two businesses are preparing a case following resolution of a dispute between Customs & Excise and travel agent Lunn Poly. The Appeal Court in February ruled Customs’ two-tier insurance premium tax regime for travel agents was illegal under European law.

Customs confirmed it would not appeal against the decision, clearing the path for electrical retailers – which, like travel agents, are subject to a punitive 17.5% tax rate – to try to obtain a similar ruling.

The standard rate of insurance premium tax is just 4%.

But Customs has already indicated it will dig its heels in over the issue.

A briefing note issued at the end of last month said the Lunn Poly judgment related only to travel insurance, and did not deal with assertions by Granada – chaired by Labour-supporting Gerry Robinson, and Thorn, owner of Radio Rentals – that the tax was also illegal for electrical retailers.

Mark Barry, Thorn’s deputy group director of taxation, said this week that the Customs briefing seemed ‘perverse’ and ignored the Lunn Poly case.

Simon Ager, a solicitor with Rowe & Maw who is acting for the two companies, said they were now considering legal proceedings against the government in the hope of getting the 17.5% rate declared illegal.

This, he said, could lead to substantial repayments of tax for both companies.

He added that they would also hope to obtain substantial damages for the harm the higher rate had done to their trade. Both companies argue they have been forced to make hundreds of redundancies and close shops as a result of the increased warranty insurance for consumer goods.

Ager emphasised a final decision has yet to be taken, but said both were considering lifting a stay on writs issued against Customs and the Attorney General last November.

Customs introduced the 17.5% IPT rate in April 1997 after concerns that electrical retailers and travel agents were avoiding VAT by ‘value-shifting’ onto insurance and warranty policies.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource